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A group of 120+ organizations, including First Peoples Worldwide, the Action Center on Race and the Economy, Amazon Watch, and the Ocean Conservancy, submitted two letters to the U.S. Securities and Exchange Commission (SEC) today asking the Commission to improve its recently-proposed climate-related financial risk disclosure rule to include the impacts of corporate activities on people and communities—as a key component of climate-related financial risk.

Specifically, the group is seeking additional disclosures and changes to the SEC’s definitions of climate-related risks to help investors understand and evaluate community impacts of corporate activities. These impacts, including human rights abuses, threats to community and worker health and safety, abuses of Indigenous and tribal peoples rights, and various threats to livelihoods and natural resources, create severe overlapping risks for companies. Investors trying to understand a company’s climate risk will not see a full picture unless they have disclosures of these intersecting community impacts.

“For years, investors have demanded mandatory, standardized disclosures on climate-related financial risks. The SEC’s proposed rule represents a critical first step toward the Commission fulfilling its mandate to protect investors from these risks, but the rule fails to consider the need for disclosures on the threats and consequences to communities due to corporations’ polluting and harmful activities,” said Chanelle Yang, Deputy Campaign Director for the Action Center on Race and the Economy. “Major project delays or cancellations, losses or suspensions of permits, and other costs to companies have followed when frontline BIPOC communities led resistance movements to fossil fuel and deforestation projects–all of which can increase legal, operational, political, and reputational risks.”

The first letter notes the specific set of rights that Indigenous and tribal peoples have, and their proven role in the protection of ecosystems that are crucial to climate stability, and then lays out arguments for where and how the SEC should add specific requirements of companies to disclose information on the nexus between Indigenous Peoples and climate-related financial risk. This follows a previous submission, sent as part of a request for information from the agency, that documented multiple instances of financial loss stemming from companies’ lack of disclosure on Indigenous rights risk.

For example, in North and South Dakota, Energy Transfer LP faced years-long Indigenous resistance to the Dakota Access Pipeline (DAPL) and a variety of legal challenges, political risks, construction delays, and operational costs. While the Standing Rock Sioux Tribe’s opposition to DAPL focused on the pipeline’s alleged violations of Indigenous rights, public attention on the climate impacts of DAPL occurred simultaneously and amplified public opposition to the project. Following this resistance, project costs tripled to more than $12 billion, and Energy Transfer turned in disappointing financial results and experienced a long-term decline in value.

“For the SEC to have the most effective rule, Indigenous Peoples must be considered throughout climate-related risk disclosures,” said Kate Finn, Executive Director of First Peoples Worldwide. “Indigenous Peoples’ human and land rights are inextricably threaded throughout environmental, social and governance (ESG) issues and are of increasing concern for investors to understand the totality of project impact and project risk. Climate and ESG disclosure criteria without explicit consideration of Indigenous Peoples’ rights means this critical information will continue to be buried until it manifests as substantial material risk.”

The second letter provides a range of case studies—across communities, industries, and companies of different sizes—where companies have faced material consequences, such as higher project costs, impaired earnings, and declining stock prices in the face of opposition from various Black, Brown, and Indigenous frontline communities.

In St. James Parish, Louisiana, for example, a Black-led, faith-based local coalition inspired a growing national movement to challenge Formosa Plastics’ planned $12 billion petrochemical complex in what is colloquially known as “Cancer Alley.” Amid this growing resistance—from protests to lawsuits to political opposition—and the resulting international media coverage, the U.S. Army Corps of Engineers has commissioned a full environmental impact statement for the project, effectively placing it on hold for at least two years. In 2022, the EPA opened investigations to determine whether the Louisiana Department of Environmental Quality engaged in discriminatory practices in granting permits in St. James Parish and St. John Parish.

“We’re pressed on every side in our small community,” said Sharon Lavigne, founder and president of RISE St. James. “Not only is it “Cancer Alley,” but we also have a front-row seat to climate change. According to Governor John Bel Edwards’ Climate Initiative Task Force, 66% of the carbon emissions in our state come from industry—more than anywhere else in the country. This makes storms and the climate crisis harder to bear. We now have major storms like Hurricane Ida approaching faster with less time to prepare. Despite all the loss and devastation, we are resolute and committed to rebuilding a resilient community.”

Aarthi Ananthanarayanan, Senior Fellow with Ocean Conservancy’s Climate and Plastics Initiative, said, “As we see in the example of Formosa Plastics and countless others, we can’t separate climate-related financial risks from community impacts—because they often intersect with and amplify one another with major consequences for a company’s financial performance. Climate risk is already real for far too many coastal communities facing the brunt of severe storms, rising sea levels, and changing ecosystems on top of a history of discriminatory environmental and housing policies. In the transition toward a clean energy economy, companies need to consider community impacts as a material factor in climate risk, and that should be addressed in the SEC’s final rule.”

Investors have made clear that they value this kind of information, as shown through unprecedented numbers of climate-related shareholder proposals, their strong preference for investing in companies that are disclosing and managing climate risks, and various investor commitments and actions related to community impacts, environmental justice, and Indigenous rights.

“Whether we’re talking about the irreplaceable role that Indigenous peoples play in the protection of forests and other ecosystems crucial for climate stability, or the fights against oil refinery pollution in their backyard by fenceline communities, corporate response to climate change cannot be separated from what happens to communities living where corporate activities occur. The SEC should seize this opportunity to provide crucial information to investors and all market participants on the inextricable connection between climate–related risk and communities,” said Moira Birss, Climate Finance Director at Amazon Watch.

The letters are being submitted as part of the SEC’s comment period, which ends tomorrow.

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For questions related to the letter addressing Indigenous rights, reach out to Amazon Watch’s Climate & Finance Director, Moira Birss at [email protected] or First Peoples Worldwide’s Executive Director, Kate R. Finn, Esq., at [email protected].

For questions related to the letter addressing environmental justice more broadly, reach out to Ocean Conservancy’s Senior Fellow (Climate and Plastics Initiative), Aarthi Ananthanarayanan, at [email protected] or the Action Center on Race and the Economy’s Deputy Campaign Director (Climate & Environmental Justice), Chanelle Yang, at [email protected].

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